Podcast Interview on The Contest for Japan’s Economic Future

Conversation With Tiffany Kayo of Coral Capital, A Japanese Venture Capital Firm

I had a wonderful conversation with Tiffany Kayo of Coral Capital, a Japanese Venture Capital firm, regarding my book: The Contest for Japan’s Economic Future: Entrepreneurs vs. Giants. She’s a first-rate interviewer who brought to the conversation her experiences in the VC world. Coral Capital was founded by James Riney, who’s been prominent for years in the Japanese VC world. The passage below shows the topics we covered in case people want to pick and choose what parts most interest them. To hear the podcast, click here.

BTW, Amazon.co.jp has been having trouble keeping enough hardcover books in stock, and Oxford University Press is working on that problem. But they are in stock now. Amazon.com has plenty. It’s also on Kindle.

01:06

Why I wrote the book: it emerged from questions asked of me during a simple lunch conversation

02:58

It takes competition and new companies to boost growth. But Japan’s barriers to the death of older, inferior companies create barriers to the rise of newer, more innovative companies.

04:54

The lack of a robust overt government-funded social safety creates political pressure to use subsidies to keep inferior firms alive. This could be the biggest political reason for low growth.

07:02

Venture-type firms (startups) in Japan have a lower death rate than in the US, where firms must either grow fast or exit the market; this creates low returns to capital and fewer unicorns.

11:43

Why the MOTHERS stock market (now called "Growth Market" creates so few companies with a billion dollars in annual sales

13:18

Foreign money and foreign VC firms can help Japanese startups, so why are these startups not attracting enough global money? What can be done?

15:12

France used to be like Japan, but in the last 30 years, it has been able to create more entrepreneurial companies through financial incentives; what can Japan learn from France?

17:16

Many in Japan say that a risk-averse conformist culture is the primary cause of insufficient entrepreneurship. Is that really true?

21:22

Many say that Japan is only good at incremental innovation, not breakthrough innovation. Is that really true?

25:34

In the younger generation, we are seeing much more of a flow of talent from big traditional companies to startups or SMEs. What are the reasons, scale, and potential outcomes of this shift?

28;52

For venture firms to succeed, they have to offer potential employees not just money but the opportunity to build something. Some stories.

32:54

Japan suffers from low productivity, which means limited living standards. Tokyo acts as if the answer were just spending more money on capital goods. But working smarter with better technology and better corporate strategy is more important in rich countries. The falldown of Japanese electronics companies

36:58

Japan was on top of the world in the analog world but fell down in the era of digitalization and software. Causes, consequences, and remedies

40:50

Digitalization and software have democratized technology, allowing small companies to thrive, with some even becoming new giants. When the technological regime changes, so must the business model. Japan failed to make that transition, but startups can help it transition now—sometimes by challenging giants and sometimes in collaboration with giants.

43:04

In any country, companies face the "innovators dilemma" where the success of old technology sometimes hampers the embrace of new technology that might replace it. So, M&A or collaboration between traditional companies and innovative startups is needed. How much of that is happening in Japan?

46:45

The LDP lost its majority in the Lower House, and we'll see if its loss continues in next year's Upper House election. Is that positive or negative for innovation and the birth of more startups?

50:53

While there are a lot of positive trends for more entrepreneurship, the single biggest obstacle—a pivotal one--is insufficient access to external finance for startups at both initial and growth stages. What are the institutional blockages, and what can be done?

52:07

There are more from VC firms supplying more capital. So, this is moving in the right direction, but not sufficiently. There are several pivotal positive trends. Generational change in attitudes toward founding, or working in, startups. The way technology can alter the social balance of power, e.g., e-commerce vs. the traditional distribution system that had hindered newcomers. Demographics is a double-edged sword. Globalization is critical. Most Japanese entrepreneurs I met had some kind of international experience in education or work.